While achieving an 8.9% year-on-year increase in revenue to R7.7-billion for the 12  months ended March 31, principal airport owner Airports Company South Africa (ACSA) continues to caution that a proposed 42.5% passenger tariff cut by the Department of Transport (DoT) for the 2015/16 fiscal period will potentially rattle its profit-making ability and future investment for its planned R8.9-billion capital expenditure programme between 2016 and 2018.

The airport management and logistics group said on Tuesday that it was currently awaiting the final permission declaration on its tariff decrease counter application of 7.5% for the 2015/16 and 2016/17 financial years, after its draft application was denied on June 5.

CEO Bongani Maseko told investors at the group’s yearly results presentation, in Johannesburg, that a comprehensive response had since been submitted to the sector’s economic regulating committee, which addressed all the company’s concerns with regard to the draft permission.

“Owing to an undesirable outcome, management is currently engaging all relevant stakeholders in the draft permission, namely, the Airlines Association of South Africa, the board of Airlines Representatives South Africa, the DoT, the Ministry of Transport and the regulating committee,” he said.

Passenger tariffs were currently sitting at R127 for domestic travellers, R263 for regional travellers and R346 for international flyers.

Maseko told investors, meanwhile, that an 8.5% increase in after-tax profits to R1.6-billion had been primarily driven by strong aeronautical and nonaeronautical revenue performances, along with an increase in the fair values of ACSA’s investment properties.

Income from aeronautical activities, which comprised 63% of total revenue and included landing fees, passenger services and aircraft parking fees, increased 8% to R4.9-billion, while nonaeronautical revenue, which encompassed income from retail, property, car rental, car parking and advertising activities, increased 10.4% to R2.8-billion.

“The group experienced a 2.4% increase in departing passenger numbers from 17.4-million in 2014, to 17.8-million in the year [under review]. This increased both aeronautical and nonaeronautical revenue performance.

“[However], on the local front, traffic growth did not meet expectations and the domestic market is still not showing any signs of sustained recovery and growth,” he said.

Maseko further cautioned that South Africa’s electricity generation crisis presented a “very real” risk to the operation of the country’s airports.

“While breaks in supply of five to six hours can be coped with, a complete two-week blackout would be nothing short of disastrous. A study is currently being conducted to establish just how long an airport can operate without its usual external supply of electricity,” he outlined.

Total assets remained stable at R27.4-billion for the 2015 financial year, compared with R27.9-billion in the prior fiscal period, while cash generated by operations increased by 4.1% to R4.6-billion, up from R4.4-billion in 2014.

The company noted that it continued to minimise its cost of borrowings through early debt redemptions where possible, reducing its debt burden by R1.9-billion in the period under review.

ACSA CFO Maureen Mayama added on Tuesday that earnings before interest, taxes, depreciation and amortisation improved 11.6% to R5.2-billion in the 2015 fiscal period, while operational expenses increased 7.5% to R1.31-billion for the year.

Besides other initiatives, Maseko indicated that, in the next three years, ACSA planned to develop a model to secure new business in Africa and other emerging markets, accelerate the company’s sustainability and transformation programme, roll out an information technology strategy and engage with industry players and legislators on the company’s regulatory and funding framework.